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A U.S. appellate court has reinstated securities fraud charges against a pharmaceuticals company because its officers allegedly provided an optimistic report about a trial drug shortly after the U.S. Food and Drug Administration had expressed reservations about it.
In 2008, Cambridge, Massachusetts-based Ariad Pharmaceuticals Inc. began development of ponatinib, a drug designed to treat patients suffering from chronic myeloid leukemia, a cancer of the blood and bone marrow, according to Monday’s ruling by the 1st U.S. Circuit Court of Appeals in Boston in In Re: Ariad Pharmaceuticals Inc. Securities Litigation.
On Oct., 25, 2012, the FDA sent an email to the company rejecting the company’s proposed label for the drug because of inadequate safety disclosures, citing concerns including an 8% rate of “serious cardiovascular events,” based on trial data.
But on Dec. 11, 2012, an investment bank published a report quoting company officers as stating they were optimistic about the drug’s prospects for approval in the U.S. with a favorable label, according to the ruling.
The company announced it was suspending the drug’s marketing and commercial distribution at the FDA’s direction on Oct. 31, 2013. The stock market “reacted harshly,” and investors sued the company and its officers, among others, on charges including securities fraud, according to the ruling. The U.S. District Court in Boston dismissed all charges in the case.
However, assuming the allegations are true, ponatinib’s chances of approval with a ‘favorable label’ weeks after learning the FDA had rejected Ariad’s proposed label,” said a unanimous three-judge panel of the 1st Circuit in reinstating securities fraud counts with respect to “one particular alleged misstatement.”
“While management may have held out hope of achieving this result, the expression of that hope without disclosure of recent troubling developments created an impermissible risk of misleading investors,” the ruling continued.
“We have little difficulty concluding that disclosure of the FDA’s concerns of the rate of serious cardiovascular events with respect to Ariad’s leading product would have altered the total mix of information available to investors,” said the ruling, in remanding the case for further proceedings.
A CNA Financial Corp. unit is not obligated to defend an attorney under its professional liability policy because the litigation filed against him is not related to the legal services he provided, says a divided appeals court, in reversing a lower court ruling.